Non-disclosure agreements or NDAs have become a common tool in business. But not everyone is clear on how and when to use them. In particular, even individuals who have signed NDAs may be unsure of how long they last and what happens when the contract expires.
What Is a Non-Disclosure Agreement?
An NDA is a legally binding contract that outlines the information the parties wish to remain confidential. It also clarifies how that information may be used. This confidential relationship is created to prevent one or more of the parties from publicly disclosing sensitive information.
NDAs are commonly used to protect things like client lists, financial information, proprietary formulas, marketing strategies, or manufacturing processes. Essentially an NDA may cover trade secrets and any non-public information that provides a company with a competitive advantage.
In practice, companies often sign NDAs before entering into contract negotiations. This allows them to discuss confidential business information relevant to the potential deal without fear that the other company will misuse or misappropriate the information. The same is true when a company seeks financing. The potential financier must know the details of the company’s financials before deciding to invest. At the same time, the company seeking funding must protect its non-public financial data and strategies during the process.
Some businesses also require their employees to sign NDAs so they do not take trade secrets to a competitor if they switch jobs. NDAs also frequently protect settlement agreement terms.
What Are the Terms of the Agreement?
To make an NDA maximally effective, the drafter should be as specific as possible without disclosing trade secrets. The NDA should lay out the parties to the agreement and what confidential information it covers. Even if the contract uses only general terms like “client lists” or “X product manufacturing process,” it prevents the party bound by the agreement from arguing later that it did not know the information was subject to the NDA.
A good NDA also clarifies what relief the injured party is entitled to if the other side violates the contract. This should include a choice of law provision so that the company can seek injunctive relief in nearby courts. Notably, both federal and Florida law provide an injunctive remedy for trade secret misappropriation.
And finally, both parties should sign the NDA so it is clear they agreed to be bound by its terms. The agreement’s duration also should be specified clearly. Because NDAs relate to parties sharing confidential information, they also must clarify what happens when the contract expires. If the parties exchanged documents, the contract might require the parties to return or destroy them within a specified time.
Should Non-Disclosure Agreements Expire?
Clients often want to know, How long do non-disclosure agreements last? Most NDAs last for as long as the agreement states in its terms, and can be for as long as the parties agree. This is particularly important for trade secrets, which have no registration-type protections and can only be protected for as long as they are kept secret. For that reason, an NDA that includes trade secrets might state something like, “The confidentiality and non-disclosure provisions of this agreement shall last for a term of five years, except trade secrets shall be kept confidential indefinitely.”
Specifying that the NDA’s trade secret protection does not expire also demonstrates your commitment to keeping the information secret. Should an employee or competitor at some point challenge a particular formula, compilation, or procedure’s right to trade secret protection, you can point to your NDA as evidence that you zealously guarded the information’s secrecy.
Companies also should keep track of what NDAs they have in place and update them when necessary. For instance, while an existing NDA may protect a trade secret indefinitely, at some point you may need to update it as the trade secret technology evolves.
BrewerLong Can Provide Non-Disclosure Agreements Applicable to Your Needs
One common mistake companies make is to draft or obtain a generic NDA and then use it in all situations. This one-size-fits-all approach likely will not result in the company obtaining the protection it seeks.
The attorneys at BrewerLong take a proactive approach to protect your trade secrets and confidential information. Our goal is to ensure that our clients avoid the stress, cost, and time of litigating claims later by being prepared in advance for meetings, deals, and new hires. We will craft NDAs tailored to your confidentiality needs. Remember that once your proprietary business information has been made public, nothing may entirely repair the damage done by the disclosure. It’s best to be proactive.
At BrewerLong, we pride ourselves on taking into account our clients’ unique needs and forming long-lasting client relationships. We help our clients’ businesses grow and flourish. And because we are a full-service intellectual property firm, we can help you protect all of your company’s intellectual property. This includes vigorously litigating to defend your rights in court if necessary. Contact BrewerLong today to start protecting the strategies, methods, and products that make your business unique.
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